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The global nappies/diapers/pants market currently stands at $30 billion, registering almost 8% value growth in 2008. Nappies/diapers/pants is the largest of all hygiene product sectors in terms of value and is the second largest sector in disposable paper products, following toilet paper. In terms of value growth, nappies/diapers/pants put in the second best performance in disposable paper products in 2008, with only the much smaller incontinence products sector growing more quickly. This continued growth reflects the fact that these products have established themselves as essential items offering very tangible benefits for which consumers the world over are willing to pay a premium.

Emerging Markets Act as Driving Force for Global Growth

While the sector as a whole registered impressive growth in 2008, there was a marked difference in performance at the regional level. The mature markets of Western Europe, North America and Australasia registered value growth well below the sector level, with Western Europe recording the lowest level of growth at 2%. In contrast, emerging regions, with the exception of Latin America (which saw value growth of 7%) registered growth well above the sector level, with Eastern Europe the strongest at 20%, according to Euromonitor International.
Demographics play a large part in this regional divide. While birth rates are slowing in many of the mature markets of the West, the opposite is true in many emerging markets. While rising birth rates grow, developing retail structures are also making products more readily available to a wider audience. In addition to these demographic factors, in countries such as Romania and Nigeria, which registered 26% and 17% value growth, respectively, more women are entering the workforce and require the increased convenience offered by a disposable diaper, and are also more readily able to afford them. These complementary factors serve to create the ideal circumstances for the sector to flourish, driving global growth despite the less favorable conditions present in developed markets.

Newborn Diapers Register Biggest Gains

As a result of the demographic factors driving the sector, newborn nappies/diapers was the best performer at the global level in 2008 with growth of 11% to take the category to $5 billion. As would be expected, the markets of Eastern Europe and Asia-Pacific registered the largest gains for the category, well above the global average. Standard nappies, however, continue to dominate the sector in terms of size, reaching $12 billion in 2008. At a global level, disposable pants remains something of a niche, registering the lowest level of growth and remaining the smallest category in the sector, at $4 billion. The category remains out of reach for many consumers, and largely used by parents able to afford newer, more sophisticated, higher-priced products, meaning growth is limited in many emerging markets.

Procter & Gamble Dominates While Private Label Suffers

According to Euromonitor, Procter & Gamble dominates nappies/diapers/pants on a global scale, with almost 36% of the market, the majority coming from sales of its Pampers brand. Kimberly-Clark is the company’s biggest challenger and commands 26% of the market. Uni-Charm takes third place with 5%, followed by SCA with a 3% share. The top three players all managed to gain share in 2008, largely as a result of their continued efforts to grow their presence in emerging markets–Procter & Gamble announced it was investing $19 million in its first diaper production plant in South Africa, while Uni-Charm expanded into South Africa through the acquisition of DSG and began construction of its first manufacturing plant in Russia.
The nappies/diapers/pants sector is generally more resistant to private label than other disposable paper product categories and, despite the difficult economic climate, 2008 proved to be no exception. The sector experienced the biggest fall in private label share of any disposable paper product, dropping to 8.6%. Consumers the world over are alike in that they prioritize the well-being of their babies over monetary concerns. In emerging markets, campaigns such as Procter & Gamble’s Pampers Mobile Clinic in Nigeria and a vaccination program in Kenya run in conjunction with the Ministry of Health, stress to entry-level consumers that branded products are the best quality option for the well-being of their children. These campaigns are intended to ensure that consumers buy a branded product as soon as they are financially able to enter the sector and create a long-lasting brand loyalty that will endure as the retail system develops and private label products become more readily available.

Procter & Gamble Innovation Challenges Private Label

Despite the threat of private label products taking share from major players being relatively low in nappies/diapers/pants, the global economic crisis prompted Procter & Gamble to experiment with extending its product range in Western Europe towards the lower end of the price scale. During 2009, the company launched Pampers Simply Dry, indicating that it takes the threat of private label seriously. The value variant, which promised “Pampers quality at a price mums can afford,” was the company’s direct challenge to private label products and was aimed at allowing consumers to trade down but remain within the brand. The move attracted much attention, but, despite the continuing difficult economic climate in the UK, no other major players have seen fit to follow suit and launch value variants in developed markets as yet. Instead, manufacturers have opted to continue with premium added-value launches, implementing discounting and bigger pack sizes to combat the private label threat.

Kimberly-Clark is First for The Environment

In terms of innovation, perhaps the most significant launch of late has been Kimberly-Clark’s Huggies Pure & Natural, launched in the U.S. in April 2009, and priced at a 15% premium over standard products. The product is hypoallergenic, latex and fragrance free and features a breathable outer cover that includes organic cotton. Although environmental concerns have to a certain extent taken a back seat in terms of driving consumer purchases during the economic downturn, they are sure to grow in importance once again when the economy recovers, particularly in this sector given the amount of negative attention being focused on nappies being disposed of in landfill sites. By being the first mainstream manufacturer to market an environmentally-friendly diaper, Kimberly-Clark is in a prime position to capitalize when green concerns return to the fore. In addition to this, another environmental first for Kimberly-Clark was its sponsorship of New Zealand’s first disposable diaper composting facility in August.
While Kimberly-Clark has taken the biggest leap with regard to environmental innovation, rival mainstream manufacturers have also launched products that make claims with regard to the environment. Uni-Charm’s Moony Man Slim Pants, launched recently in Japan, are available in half the thickness of standard disposable pants and promoted on the basis of their lower-than-average carbon footprint. Procter & Gamble, meanwhile, revealed in late 2009 that it has developed a yet-to-be-launched 20% thinner diaper as part of its Future Friendly sustainability commitment.

Daio and SCA try Out New Products

In terms of other innovation, Japan’s Daio Paper launched two products in 2008 that might be indicators of the sector’s future development. Goon Premium Tenshi no Ubugi is impregnated with vitamin E for skin softness and a more comfortable backsheet, while Goon Training Pants change temperature and become cool on contact with urine, thus alerting the baby. The pants also feature a “notice sign” that turns from yellow to blue and are available in variants for boys and girls. A product in a similar vein came from SCA in the form of Libero Potty Training Pants, launched recently in Sweden, which are targeted at infants who have started potty training. The pants feel wet and are aimed at helping children to stop using nappies/diapers/pants. Although the product has yet to generate large sales, the popularity of such products is expected to increase as awareness of the benefits of potty training pants increases among parents. A more premium innovation from SCA was its Libero Spring Collection range, which features diapers designed by young Swedish designers. The range was only available during the spring and was targeted at fashion-oriented parents.

Emerging Markets Come Further to the Fore

According to Euromonitor International, the nappies/
diapers/pants sector is predicted to rise 5% per year to 2013 to reach $37 billion, with emerging markets continuing to be the drivers of growth and offering real potential to manufacturers. While the U.S. currently remains the largest market for nappies/diapers/pants, standing at $5 billion, it is growing at a slower rate than both China and Russia and will continue to do so. Although the U.S. is likely to remain the world’s major market until at least midway through the next decade, China in particular is quickly closing the gap. While China and Russia will continue as global growth drivers, South Africa, India, Indonesia and Nigeria, which all have high birth rates combined with fast developing retail systems and low per capita spending, are expected to perform strongly throughout the forecast period, again developing into greater forces.
To find success in these markets manufacturers will need to initially offer diapers across the price spectrum, with more premium products targeted at the urban elite and cheaper, more basic products aimed at expanding the rural market. Over the longer term, continued development of the sector will no doubt follow along the lines of innovation seen in the West, with manufacturers expanding their ranges to include wipes and washes.

Corinne Gangloff, Freedonia Group||March 11, 2013The U.S. will remain a large market for various consumer products due to favorable demographics, and manufacturing of these products will likely remain near the point of demand.